Business Strategy | Leadership / Management | Legislative / Regulatory

MACPA joins effort to block DOL’s new overtime-pay threshold

The Department of Labor’s contentious plan to raise the salary limit for employees who are eligible for overtime pay has left many businesses seeing red.

Now, those businesses — including the Maryland Association of CPAs — are putting their objections into writing.

The “Partnership to Protect Workplace Opportunity” has sent a strongly worded letter to Congress stating its objections to the DOL’s plan to raise the threshold for overtime eligibility from $23,660 per year to $50,400. Such a move would make nearly 4.6 million additional workers eligible for overtime pay and put a financial squeeze on many businesses.

The final rules likely won’t be published until late 2016.

The following comes straight from the Partnership’s letter:

“If the (DOL) goes forward with the changes it proposed, the impact will be unduly burdensome on employers and ultimately result in significant, unintended consequences on employees. … The millions of employees converted from exempt to non-exempt status would lose the flexibility that they currently enjoy and have fewer opportunities for career advancement. Employers must closely track work hours for non-exempt employees to ensure compliance with overtime pay and other requirements, which means workers have less autonomy and fewer opportunities for employer-sponsored career training and enhancement. In addition, those reclassified to nonexempt status as a result of the new rule are unlikely to receive a pay increase and in some cases, may see a decrease in pay. Just because an employee is eligible for overtime pay does not necessarily mean the employee will earn overtime pay. Hourly employees are not guaranteed any fixed weekly pay—like salaried employees—or guaranteed any specific hours. Employers must carefully manage labor costs to remain in business and frequently limit employees’ hours to prevent paying overtime. There is no reason to believe employers will stop doing so after DOL implements this rule.

“Even with controlling for possible increased overtime, the cost associated with mass reclassification of employees is staggering. According to the National Retail Federation (NRF), which conducted an economic analysis of the proposal on just retail and restaurant industries, those businesses will see an increase of over $8.4 billion per year in costs with the proposed salary level. The Office of Advocacy within the Small Business Administration (SBA) expressed concerns that DOL did not consider the impact of the proposal on ‘key small entities’ like a non-profit organization ‘operating Head Start programs in southeast Louisiana’ which will have to cut many critical services as a result of the $74,000 in first-year costs this proposal will cause.

“Particularly troubling is the impact of these increases on regions of the country with a lower cost of living. What works in Washington, D.C., New York City, and San Francisco will not work inIndianapolis, Louisville, Birmingham or Boise, let alone other rural areas. Yet, DOL set the proposed minimum salary threshold nearly $10,000 higher than that of California and nearly $15,000 higher than New York – two of the country’s most expensive states to live. This will disproportionally impact workers and companies in cities and states with a lower cost of living, including college graduates in those areas who will start their professional careers with less flexibility and fewer opportunities for advancement. As the SBA noted in its comments, DOL failed to “consider the difference in purchasing power of its proposed threshold in higher- and lower- wage states and regions.” In fact, the SBA found DOL’s economic analysis so faulty that it recommended DOL publish a supplemental “analysis on the economic impact of this rule on small entities and consider small business alternatives.”

“The Department’s proposal also fails to account for the devastating impact such an increase is likely to have on certain sectors of the economy, such as retail, restaurant, not-for-profits, educational institutions, and on state and local government. An Oxford Economics report commissioned by the NRF estimates that 2,189,600 retail and restaurant workers, or 64 percent of exempt workers in the industry, would be affected by the increase in the salary level.

“… In light of these concerns, we ask that you please contact the (DOL), the Office of Management and Budget’s Office of Information and Regulatory Affairs, and other officials within the Administration and urge them to reconsider this rule.”

The MACPA is one of at least 20 state societies of CPAs — and more than 160 businesses in all — that signed the letter.

Read the Partnership’s letter in its entirety.


Bill Sheridan